May 15, 2007

Measuring The Impact Of Climate Change On Corporate Performance

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A Merrill Lynch report, Combating Climate Change -? Opportunities and Risks, has put forward the idea of measuring how much revenue or profit is generating for each ton of CO2 emissions as a way to value companies, Marc Gunther reports. A low Rev/CO2 or Rev/EBITDA ratio would signify risk, evidence that a company would struggle under carbon regulations. 

Gunther points out that groups like CERES have pushed companies for years to report on how they are preparing for climate change. Innovest Strategic Advisors rates companies on their environmental and social performance.

Anytime a long-term issue like climate change gets the attention of Wall Street, Gunther writes, which typically promotes short-term thinking and quarterly targets, it’s worth noting.

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